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Why hire a collection agency?

Have you been facing issues with collecting from your delinquent customers? Lack of money receipt on time is bad for any business. All your strategic plans tend to go haywire. And you are not along facing this problem. There are thousands of businesses in the country that face issues collecting from their customers. The prudent among such businesses hire collection agencies. The job of a collection agency is to collect money from delinquent customers using ethical methods.

Why don’t customers pay? Well in some cases it depends upon their financial condition. One may lose their job and their sole focus would then be on sustenance. They would never think of paying their creditors. A common perception among many customers that become delinquent bank customers is that the bank has enough money. So even if they don’t pay for a while it doesn’t affect the bank at all. Unfortunately it doesn’t work like this. Banks need to collect their money on time because their profits take a hit if there are too many delinquent customers. And the situation is worse for smaller lenders. Hence, the collection agencies are in business. A collection agency collects money from delinquent customers and gets a percentage of the collected amount as commission.

But then hiring collection agencies means expense for the lender because there is the commission to be paid. But isn’t paying commission much better than being not being able to collect from customers? For a customer that owes a lender $100 and doesn’t pay up the total receipt is $0. If a collection agency is able to collect this $100 and charges, say $5 for the job then the lender still realizes $95. This totally makes business sense and this is why these agencies are so much in demand.

Today the laws related to collection have changed. The Fair Trade Practices Act lays down strict rules and regulations related to collection processes. As a result of this act customers now have power in their hands. If someone is not willing to pay then collectors cannot engage in what are seen as unethical modes of collection. There are strict penalties in place if a customer files a complaint against a collector. The advantage of hiring a collection agency is that they can collect by staying within the aegis of the act. They have their tactics that they employ to collect from delinquent customers. And for those customers that are willing defaulters there are legal recourses that collection agencies use. The lender gets their money back and that is what they want.

For businesses it is not possible to spend time and effort collecting money from delinquent accounts. And one cannot stop at one collection because many a delinquent customer would continue to default month after month. The collection agencies keep following up with such customers to ensure that the money is collected on time and deposited with the lender. This is what a collection agency is for and this is why hiring such an agency makes sense.

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